Benefits and drawbacks Of Taking A Charge card Balance Transfer
Credit card balance transfer, also known as a credit card funds transfer, is a useful product that can help you better manage your money.
If you are thinking about to consider credit cards balance transfer, listed here are the pros and cons in doing so.
What Is Credit Card Funds Transfer?
A credit card funds transfer is a credit facility offered via your credit card.
The line of credit granted in your charge card is the maximum amount you'll be able to charge for your retail purchases such as purchasing a laptop, air tickets for a vacation, etc.
On another hand, a credit card funds transfer allows you to convert the credit line on your credit card in the form of cash to pay for purchases. You can obtain a charge card funds transfer at 0% interest having a one-time processing fee for a period of 6 or Twelve months.
When used correctly, charge card funds transfer is definitely an effective tool to help you manage credit debt or repay other loans that you may have taken.
Credit Card Funds Transfer – Pros Of Taking One
Let's begin with how charge card funds transfer can aid in managing your cashflow.
# 1 Low Interest Rate
Besides a one-time processing fee, most credit card funds transfers don't charge any extra interest around the approved funds transfer amount during the approved promotional tenure.
For example, Standard Chartered Charge card Funds Transfer has a processing fee of just one.99% (Effective Rate of interest (EIR): 4.12%) for any 6-month tenure and 4.5% (EIR: 4.86%) for a 12-month tenure with zero interest rate^ for both.
Comparing the EIR between charge card funds transfer and personal loans, the price of borrowing is really a lot lower.
|Credit Card Funds Transfer||Personal Loan|
|Loan Tenure||12 months||12 months|
|Effective Interest Rate||4.86%||8% to 13%|
If you'll need short-term funds to invest in something that you have to purchase (e.g. a medical emergency), credit cards funds transfer is one of the quickest ways in getting the funds you need.
You can enjoy interest-free funds having a one-time processing fee based on your chosen loan tenure of 6 or 12 months. However, do observe that if you miss your monthly minimum repayment through the payment due date, prevailing interest and late fee charges will start working.
# 3 Pay Other Loans
One from the premiere factors behind using a charge card funds transfer is for paying other loans you might curently have.
For example, for those who have unpaid credit card debt, you will start incurring a high interest of at least 24% p.a. for every month the bill continues to remain unpaid.
As explained in our previous article, whenever you take a credit card funds transfer, you should use the funds to pay any existing bills or loans that you have. Thus, you get to lessen the amount of interest you have to pay, because the EIR for charge card funds transfer is lower compared to EIR that you'd well be paying for your other credit card bills and loans.
Credit Card Funds Transfer – The disadvantages Of Taking One
While a credit card funds transfer certainly has its uses, there are several potential drawbacks that you ought to learn about.
# 1 Will still be A Credit Facility
This may be obvious to most people but tend to be overlooked by some users.
Although credit cards funds transfer gives you extra funds, it is still a credit facility in which the amount you have borrowed still has to become paid.
For example, if you obtain a credit card funds change in $5,000 over a period of Six months and use it to pay your credit card bills, it will save you on the higher interest you might have otherwise incurred when the bills remained unpaid. However, you'll still have to pay the principal amount of $5,000.
# 2 Penalties For Missing Required Payments
While credit cards funds transfer provides you funds at 0% interest, this interest is dependent on you meeting the repayment schedule.
If you are unable to repay the total amount borrowed after your tenure period, you will be charged prevailing interest on the remaining principal amount you owe and late fee charges.
Similar to credit card bills, you will be necessary to make minimum monthly payments. Normally, this is between 1% to 3% of the principal amount borrowed, so you'll need self-discipline in ensuring your minimum debts are paid on time.
# 3 The number you Borrow Is Offset Upon your Available Credit
As mentioned earlier, as a charge card funds transfer is a credit facility offered via your credit card, the amount approved through a charge card funds transfer is going to be offset against the available credit limit in your charge card.
For example, in case your available borrowing limit is $10,000 and you use $8,000 for a credit card funds transfer, you will simply have the ability to charge an additional $2,000 to your credit card, until you have paid the principal amount where your borrowing limit is going to be restored accordingly.
Thinking Of Applying For Credit cards Funds Transfer?
If you are keen in trying to get credit cards funds transfer, the conventional Chartered Credit Card Funds Transfer is definitely an option you can consider.
It offers interest-free funds transfer with a one-time processing fee of either 1.99% (6-month tenure) or 4.5% (12-month tenure) which is charged around the first month. The minimum monthly repayment is at 1% from the principal amount borrowed.
If you intend to find out more or want to apply for the Standard Chartered Charge card Funds transfer, you can do so here.
^This promotional rate of interest is just valid for that approved tenure. The current rate of interest chargeable for that Credit Card account will apply following the approved tenure around the outstanding principal amount.